Year-to-date, the Securities and Futures Commission (SFC) has already imposed HK$191m ($24.37m) in penalties to financial intermediaries, including fund managers and distributors, which is more than double (203%) the HK$63m last year, Atkinson said in a speech at the Refinitiv Pan Asian Regulatory Summit yesterday.
He noted that the amount last year excludes the HK$400m fine paid by HSBC as a result of a case related to failures in the sale of structured products – namely Lehman Brothers-related notes and Leverage Forward Accumulators.
“The multiplier approach was adopted in that case to ensure that the penalty was proportionate to the misconduct, in order to achieve the intended deterrent effect,” Atkinson said.
In the past year, the SFC has reprimanded and fined several firms due to various reasons. In July, HSBC Broking Securities was fined HK$9.6m for failing to conduct proper product due diligence on individual bonds before making recommendations to clients.
In June, Hang Seng Investment Management was fined HK$3m for its failure to comply with regulatory requirements on cash management involving SFC-authorised funds.
In May, Noah Holdings was fined HK$5m for failing to comply with know-your-client (KYC) requirements, product due diligence, suitability assessment, information for clients, and sales supervision and controls.
Credit Suisse was also fined HK$39.3m in February for internal control failures and selling unsuitable products.
Atkinson acknowledged that bigger fines do not necessarily equate to a better deterrent. “But in our case, it does illustrate that we are ‘on strategy’, as we focus on the more serious matters impacting the investing public, the size of our fines has naturally increased as well.”
Atkinson explained that this year, the regulator has focused on serious internal control failures and conflicts of interest in firms that could affect the investing public.
The SFC has also been leveraging on the manager-in-charge regime, which was implemented in October last year, to help it identify the senior managers in charge of core functions.
“We are using it as a roadmap to pin down those senior individuals responsible for different types of misconduct. We are currently pursuing a number of MIC investigations focusing on serious misconduct that raised firm-wide compliance and internal control issues.”
